Cisco's big investment in Russia

President of Russia Dmitry Medvedev, right, writes a Twitter message as Twitter co-founders Evan Williams, left, and Biz Stone watch at the Twitter office in San Francisco, Wednesday, June 23, 2010.

President of Russia Dmitry Medvedev, right, writes a Twitter message as Twitter co-founders Evan Williams, left, and Biz Stone watch at the Twitter office in San Francisco, Wednesday, June 23, 2010.

Photo: Jeff Chiu, AP

Photo: Jeff Chiu, AP

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President of Russia Dmitry Medvedev, right, writes a Twitter message as Twitter co-founders Evan Williams, left, and Biz Stone watch at the Twitter office in San Francisco, Wednesday, June 23, 2010.

President of Russia Dmitry Medvedev, right, writes a Twitter message as Twitter co-founders Evan Williams, left, and Biz Stone watch at the Twitter office in San Francisco, Wednesday, June 23, 2010.

Photo: Jeff Chiu, AP

Cisco's big investment in Russia

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In his hunt for Silicon Valley help in launching Russia into the high-tech age, President Dmitry Medvedev has bagged a big one.

Cisco Systems Inc. says it will invest $1 billion in Russia over the next decade, plus $100 million in venture capital. Cisco also will establish a "dedicated physical presence" in a planned technology hub outside Moscow, touted as "Russia's Silicon Valley."

"Simply put, we're all in," said Cisco CEO John Chambers at the company's San Jose headquarters Wednesday, with the Russian president beaming by his side. "We will be great partners. We will try never to let you down."

Cisco does not share the doubts expressed in many quarters about Russia's high-tech potential and Medvedev's drive to modernize the former empire.

"The best advice is not to take the chap seriously," said Michael Bernstam, an economic demographer at the Hoover Institution, whose work focuses on Russia.

"The first thing you hear from investors is that they need to get the fundamentals right," says Samuel Charap at the Center for American Progress. Charap, the center's associate director for Russia and Eurasia, referred to obstacles such as corruption, problems with the rule of law, including murderous human rights abuses, and an economy dependent, to the exclusion of almost everything else, on its oil and gas resources.

"But it doesn't mean Russia can't do innovation," he said.

On that score, Cisco has been bullish on Russia for some time, most recently as an anchor investor in Almaz Capital Partners, a Russian venture capital firm with an office in the Bay Area. Last week, Almaz Capital announced a $35 million investment in Skolkovo, the Moscow-area planned "innovation city," launched by Medvedev and which Russian boosters liken to Silicon Valley.

"There's always a risk, but we feel it's a manageable risk," said Marthin de Beer, senior vice president of Cisco's emerging technology group. (Details of Cisco's Russia plans at links.sfgate.com/ZJWO).

Sweetening the pot for Cisco and others who may be interested in Skolkovo - Medvedev's primary pitch - are 10-year tax holidays, fast-track residence and work permits for foreign professionals, even its own police force, according to a Russian business daily.

Those seeking further reassurance may want to talk to Intel Corp.'s former CEO, chairman and president, Craig Barrett, who was named co-chair of Skolkovo's supervisory board in April, or to Skolkovo board member Eric Schmidt, CEO of Google Inc.

They may want to avoid Google co-founder Sergey Brin, who, unlike Schmidt, did not meet with Medvedev this week, and who once referred to the country of his birth as "Nigeria with snow" run by a "bunch of criminal cowboys."

De Beer thinks others in Silicon Valley will jump aboard. "The climate didn't used to be so good, but it feels different now. The push is coming from the top.

"We'll have to wait and see."

Mea culpa: Wednesday's column item on a Bay Area Council delegation visit to Shanghai last week apparently left some wrong impressions.

It stated that local officials made possible the delegation's VIP visit to the Shanghai Expo and other nonwork activities. As "payback," the impression was conveyed, the local authorities expected the council to present plans in a future visit for getting more Bay Area business and investment in Shanghai.

Not so, says the council. The VIP access to the Expo was arranged by the council through the consulates of various countries, "and helped by local officials."

Meetings with government ministers, industrialists and others were set up by the council, as were the dinners mentioned in the column.

Concerned that the column overly focused on what the Bay Area Council could do for Shanghai, one of its executives responded, "Our effort is about helping the Bay Area's small- and medium-sized business access the world's fastest-growing market (with its customers) - one they probably couldn't access without our help."

As for the "payback" reference, and my closing comment - "the Bay Area Council has its orders"- which was meant to be light, not literal, council CEO Jim Wunderman(his fuller response to my column appears on today's editorial page), wrote "this kind of implication can do real harm. Please be certain - no one in China has the power to order us to do anything, nor has such desire been expressed."

Point taken.

Time marches on: A letter to the editor in Wednesday's paper referring to the Bay Bridge span being built in China noted reports that "China will overtake the United States in manufacturing in two years."

Cut that in half. According to IHS Global Insight, China will likely overtake us next year, and even this year could be a "close call."